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Fool Portfolio Report - Friday, April 12,
1996

ALEXANDRIA, VA, April 12, 1996 -- With the last 6 weeks so dominated by
huge moves from our darling stocks America Online and Iomega, it was with
no small satisfaction that we at Fool HQ watched the Fool Port beat the market
Friday on the wings of other high-flyin' birds. With Sears up $2 3/4, Gap
(which split yesterday) up another $1, and General Electric posting a gain
of $1 3/8, the Foolfolio strode forward .88% today, edging out the S&P
500 (up .87%) and the NASDAQ (up .34%).

For the week, the market posted its worst of the year, with the S&P
500 off 2.9% and the NASDAQ dropping 1.6%. Our Foolish portfolio declined
.9%.

But Friday was a strong day for the market, which occurred amusingly enough
in the face of an extremely bearish market forecast on the front cover of
The New York Times. "While the rest of the city enjoyed a beautiful spring
day, it was drizzling Thursday on Wall Street, where spirits are being dampened
by the nasty suspicion that maybe, just maybe, the stock market will not
continue to go up forever," the article begins. . . as if the stock market
has, or ever will. Y'know, when I come across this sort of misleading premise
in the first line of an obviously loaded article, I often don't read on.
But this is The Times, right? So I figure I have to.

After pointing out that the previous five days had been the worst in two
years, the writer opines, "For the first time in a long time, the stock market
is not immediately bouncing back from bad days and bad news." Umm. . . anyone
see what happened today?

OK, it's not worth belaboring this point (and it's also not worth reading
that article) but if serious journalists are going to take ridiculously
short-term movements in the market as signs of doom---signs of ANYTHING,
in fact---then their work will inevitably not end up being very serious.
I think Fools are beginning to see through this stuff.

(NOTE: We can't help but mention that eternal contrary indicator Michael
Metz---a subject of our January column for SmartMoney Magazine---is quoted
as saying, "Until last week confidence was very high that inflation was not
a problem, rising interest rates are not a problem, the Fed is not a problem.
Now the whole story is gone, and it was the only justification for a market
that otherwise looks extremely overvalued.'')

By contrast, Fool HQ spends just slightly less than 0.1 minutes a year
considering where the market might go, and we continuously encourage our
fellow Fools to do the same. That's because we simply don't believe ANYONE
consistently KNOWS where the market is going over any short term, and those
who presume to do so aren't worth your time. True, the high-powered Wise
at New York brokerage firms are everywhere TRYING to do it, and we see the
same names (Michael Metz, Barton Biggs, Byron Wien, Laszlo Birinyi) over
and over in articles like that in The Times today. But we're here telling
you that if you're a long-term investor---if you're a Fool, that is---you
should just keep your savings invested in the stock market and keep constantly
adding to it over time. There will be good times, there will be bad times,
but for those with the fortitude and the faith to stick it out through both,
there will be much greater returns than through any other vehicle. That's
obvious whether you look at the distant past, the recent past, the present,
and (we have every reason to expect) the future as well.

In fact, my personal take on this whole thing is that to me, the future
keeps looking better and better. We're living in the midst of an incredible
technological revolution that is changing our business world every day. For
the better. . . American business is now more profitable than ever before,
and bristling with new markets, new products, new technology, and new
opportunities. Government used to drive this country. . . government today
seems increasingly irrelevant to me. What I see changing our nation and the
world today is business (for better and worse) and America is well out ahead
leading it. The smartest and most ambitious businessmen and investors are
taking advantage of it. And the field day they're having is still in the
early-morning stage.

Indeed, the greatest risk posed to our stock market is not economic, I
think, but probably one of sentiment. That is, I think you're going to see
a monster economy in the U.S. going forward for the foreseeable future. .
. just look at what the Internet will mean, then look at all the American
companies that are driving it. The stock market over a short-term period
could get a bit carried away with these prospects and overshoot real value.
But will that be a terminal problem? Will that cause The Crash of No Return
that bearish journalists keep suggesting will happen? I don't think so. .
. that these people DO write such articles gives a Fool even more reason
for confidence.

But one example of the overhyped sentiment mentioned above has to be the
Web search engine company IPOs. With simple (and pretty duplicable) Web search
engines like Lycos and Yahoo now suddenly commanding market caps of several
hundred million dollars, we continue to see a fairly profound misunderstanding
of the digital world by our Wall Street brethren. With a current market cap
of approximately $825 million (following its debut today), Yahoo---with minimal
sales---is valued at approximately 1/5th of America Online. And talk about
volatile: Yahoo traded as high as $43 today and as low as $24. You won't
find us throwin' any Foolish dollars that way. (A Foolish news package detailing
the Yahoo story is available by clicking the Stock Research button on our
main screen.)

And now, on to our stocks. The Gap and Sears rose strong again today following
same-store sales announcements for them yesterday. As you'll recall, Gap
yesterday announced overall sales gains of 32% over March of last year, and
its March same-store sales were up 13%, vs. NEGATIVE 7% numbers for March
'95. Gap now has 1705 stores nationwide.

Sears posted same-store gains of 6.8%, not quite as impressive but good
nonetheless, and enough to send the stock soaring forward today once again,
to a new all-time closing high. Both have us pleased as punch, as they're
up better than 70% since our initial purchase. . . bought at a time when
you could find nary a Wall Street analyst who liked this sector. And more
than one journalist and gooroo telling people to avoid the market altogether!